Thursday, February 6, 2014

Farewell Sony Reader Store

Sony today announced the imminent closure of its Sony Reader Store in the US and Canada. The store will remain in operation until March 20, after which it will cease ebook sales.

Effective immediately, Smashwords will cease delivery of new titles to Sony. We will continue to deliver metadata updates and takedowns, and Sony will continue to process them.

What this means for authors: Any time any retailer closes - especially one such as Sony who pioneered the ebook market - it's a sad day. Along with Barnes & Noble, Sony was one of the first two major retailers to embrace self-published ebooks when Sony partnered with Smashwords in 2009. Sony's devices and ebook store predated Amazon's, so when the history books of the indie author revolution are written I hope historians give Sony the credit they deserve as a true pioneer. My sentiments and appreciation for Sony and their awesome people aside, the impact on Smashwords authors today will be minimal. The Sony store, as most authors know, is one of the smaller retailers in the Smashwords distribution network. To put this in perspective, on a typical month, less than 2% of our authors' monthly sales come from Sony.

Next steps for Smashwords authors (updated): If your books are already listed at Sony, there's nothing you need to do. On or around March 20, your book's listing at Sony should disappear. Your customers at Sony will have ample opportunity to backup their purchases.

Next steps for Sony customers (updated): Kobo, a Smashwords partner, will assume control over Sony's customers relationships, giving most Sony customers the option to migrate their Sony libraries into their Kobo library to maintain access to their books. Note that the Sony book files will not transfer from Sony's servers to Kobo's servers. Kobo will use the ISBNs (unique digital identifiers) of the Smashwords/Sony books to map the customer's purchase to the same book at Kobo. Kobo has created a helpful FAQ page to assist Sony customers in the transition at http://www.kobo.com/sony Sony has created a similar page of instructions at http://blog.sony.com/2014/02/the-future-of-reader-store/ If Smashwords books have been purchased by Sony customers, and those books aren't currently distributed and onsale at Kobo, then those books will not transfer. Authors can mitigate this customer inconvenience by ensuring all their Smashwords Premium Catalog books are opted into Kobo. Since Smashwords distributes to Kobo under a separate agreement, the book product listings at Sony will not transfer to Kobo. For Sony customers, the migration to Kobo is optional. Even if Sony customers choose not to migrate to Kobo, they can download previously purchased books from the Sony Reader Store until April 30, 2014. However, if Sony customers transfer their library to Kobo via the transfer link, they will continue to have access to their ebooks after this date, assuming those same books are available for sale at Kobo.

What led to the Sony closure? One can only speculate, but the bottom line in my opinion is competitive pressure from all sides - from device-makers, tablet-makers and other stores, and Sony's inability to remain competitive in the fast-evolving ebook device and retailing spaces. Although they pioneered the ebook industry, the industry grew up around them and grew faster than them. Our sales levels at Sony over the last four years have remained relatively flat, whereas our sales at other retailers have grown by multiples. Another contributor: Amazon price matching. As many Smashwords authors know, Smashwords and our retailers Apple, Barnes & Noble and Kobo have dramatically improved our ability to quickly and accurately load Smashwords titles and metadata updates. Sony's integration systems, although they have improved over the years, by comparison have not evolved at the same rapid rate as its competitors. Over the last few years, this led to frequent price matching from Amazon, and a lot of author frustration, which led many bestselling Smashwords authors to opt out of Sony entirely. Price matching is a blunt force weapon that Amazon wields with impunity. Amazon knows its price-matching practices place immense pressure on its competitors. Here's how: If Amazon finds a KDP book priced lower elsewhere, it price-matches to the lower price. If you're enrolled in KDP Select, or enrolled in the 70% royalty rate, this price disparity situation puts you in direct violation of Amazon's terms of service, which leads to a threatening email from Amazon notifying the author of the violation and the consequences of such violation. Amazon punishes the author with full knowledge that the price discrepancies are not the author's fault, and then authors feel pressured to abandon the smaller retailer rather than risk facing Amazon's future wrath. The behavior this motivates (opting out of the smaller retailer forever) then harms the smaller retailer and makes the author more dependent upon Amazon. Amazon has always been brilliant in this regard. They know how to litter the stage with land mines (constructed of policies and consequences) in plain view and then wait for their competitors (be they retailers or Big 5 publishers) to step on them. "Oh, didn't you see the big warning sign in your contract?" But without question, it would be unfair and inaccurate to claim Amazon or indie authors killed Sony. Amazon's price matching represented only one of many competitive pressures that set the stage for this. Ultimately, in the cruel and unforgiving competitive world we live in, the responsibility is Sony's alone.

What this means for the industry: Any time we lose a retailer of any kind - whether ebook retailer or neighborhood bricks & mortar retailer - it's a sad day. Book culture, and book sales opportunity for authors, is maximized by having as many booksellers as possible employing as many passionate booklovers as possible out there dedicating their every day to connecting books with readers. The more retailers there are, the less dependent the author becomes on any one single retailer. Diversification is good. Concentrated risk is bad. It would be a sad day if five years from now 95% of ebook sales consolidated around one or two retailers. Such a state of affairs would strip indie authors of their independence and power. So although the loss of Sony is inconsequential from an author sales perspective, it provides a cautionary reminder that it's in every author's best interest to foster a diverse and thriving ecosystem of multiple ebook retailers. Ultimately, the retailers that indie authors support and promote are the ones that will survive and thrive in the future.

Farewell Sony. I wish our friends at Sony the best and trust their dedicated team members will find new opportunities to participate in the ebook revolution they helped create. I'm so appreciative of the amazing support they provided Smashwords authors over the last five years.

I hate to see Sony go like this and I'm hearing rumblings (Forbes article about it) on Barnes and Nobles getting into deeper trouble. I certainly haven't sold a ton of books via Sony but I've done well with Barnes and iTunes is looking better. Mark.. what's your thoughts on Barnes' troubles and your outlook for iTunes?Chas Wells Smashwords Author since 2011

Mark, I share your concerns about the loss of a retailer. But it has been clear for some time now that Sony was no longer competitive in its market. And I share similar concerns about B&N and Kobo. I'd love to hear your views on the state of the ebook marketplace. Thanks, jd

Charles and Emily, re: B&N, I read the same doomsday stories as everyone else on B&N but I think the stories are overdone. I'm more concerned about the long term negative impact of these stories on customer (reader) perception, since at a certain point perception becomes reality. If too many customers start questioning B&N's viability, they'll go elsewhere for their next e-reading device. B&N still has a lot going for it (they still sell a ton of ebooks and have millions of customers and device users, smart people working there, and foot traffic through their physical stores) but they're not out there telling the positive story to counter the chicken little doomsdayers. re: Kobo, Kobo has grown a lot the last few years. They've got a lot of things going for them as well (strong corporate backer with a lot of cash, strong international footprint, partnerships with indie bookstores, smart people, millions of customers, growing brand recognition). I'd like to see both of them abandon their direct publishing platforms and instead focus their dollars and energy on building out the best retail and book discovery experience possible for their customers. They invest a lot of money and energy trying to woo authors away from Smashwords at the same time Smashwords invests our dollars and energy trying to grow our retailers' businesses for the benefit of our authors. So we're working at cross purposes when we should be more aligned. I think it was a mistake for both of them to spend millions of dollars trying to copy KDP when Amazon's reason for KDP is completely different than their own. There's a reason distributors worked so well in the print book business. They offer more efficient supply chain logistics for the benefit of authors, publishers, retailers and customers alike. Since books are a low-margin business, and because everyone's biggest competitor thrives on driving down margins for its suppliers and competitors, no retailer except Google and Apple can afford to lose money on books for very long.

I have a Sony ereader, but I only used the Sony store and software for the first month I owned my ereader, several years ago when I first bought it. The store and software were nightmares to use, and I must admit that the disappearance of the Sony store will have mnimal effect on me. I'm looking forward to using the more user-friendly Kobo versions. Right now I get all my Smashword books directly from Smashwords, but if the Kobo options are easier to use with my reader, I might just use them instead.

The way I see it, supermarkets may be the only ones who can challenge Amazons dominance. I would be interested to know if SW (Mark) is planning on talking to Tesco and Sainsburys in the UK and (IM very sure) Walmart in the US when those ebook stores appear, as they will.

Really interesting breakdown, particularly regarding the price-matching piece of the puzzle. Just recently B&N took so long to update the price on one of my books (two months, resulting in quite a bit of lost income) I nearly opted out. What was supposed to be an "over the holidays" sale turned into a "going on three months" sale. At the time I wasn't thinking in terms of the big picture, but what Mark says makes a lot of sense. A large number of frustrated authors opting out for similar reasons would definitely have an impact.

Vincent, I think Apple offers the strongest counterbalance. They're the world's second largest ebook seller now (not a lot of people realize that). B&N and Kobo represent strong forces for diversity as well. There's also a new field of ebook subscription services, Scribd and Oyster, that aim to become major sales outlets as well. The next couple years will be very interesting!

Lorna, we're always open to considering new distribution partners, so if these companies put forth compelling solutions we'd want to work with them and support them. The more retailers working to support indies the better. Most of the prospective retailer startups who come to us lack compelling go-to-market strategies, or they're under-funded, or they lack the technical and business experience to make their retail operation work. BTW, we are nearing integration completion with a new partner that will be *very* exciting. Stay tuned for that. :)

Kathy, yes, that's a common omission on author websites, blogs, social media promotions and email signatures. I encourage authors to link to all their retail partners, large and small. Let the reader choose their favorite store. There are millions of readers who prefer to shop at stores other than Amazon, so when authors don't provide single-click access to these other retailers, they're favoring one retailer at the expense of others. They're also creating unnecessary friction that makes their books less desirable to to prospective readers who prefer these other retailers.

Another big problem is KDP Select. Amazon's book business is heavily tilted toward incentivizing authors to go exclusive with Amazon. In their most recent quarterly earnings announcement, they mentioned they've got 400,000 Kindle-exclusive books in their catalog. If anyone doubts Amazon's exclusivity strategy, it's worth noting that the word "exclusive" was mentioned *seven* times in that press release.

Do those authors realize that every time they make a title exclusive to Amazon - even if only for three months - they're casting a vote to put every other retailer out of business? Most of these KDP Select titles are from indie authors. Indie authors need to recognize that indies are the rising power in publishing today. Your vote matters. The percentage of book sales derived from indies is increasing each year. Five or ten years from now, the big NY publishers won't matter as much as they matter now. Amazon realizes it's already game-over for the big publishers, which is why they're working to bring authors into their direct stable. The retailers that are left standing five or ten years from now will be the ones that indies supported. Support wisely, my fellow writers! :)

Melinda, yes. Amazon's policies are set up to motivate a certain author behavior (opting out of other retailers) each time a competing retailer makes a pricing mistake. Fear is one of the most primal and powerful human emotions. When you get an email from Amazon threatening to punish you for another retailer's error, it doesn't feel good. The author feels powerless, angry at Amazon's competitor, and then takes action to Amazon's benefit. It's certainly not to the author's long term benefit to close down their sales channels, but the author gets caught between a rock and a hard place. Amazon is the only retailer that plays this sort of psychological warfare.

Thanks for the answer Mark. I think, for authors based in the UK the supermarkets I mentioned before, Sainsburys and Tesco are going to be BIG players. Sainsburys is already up and running and Tesco (one of the biggest companies in the world, no worries about budget) on the way. They will undercut Amazon big time. Also, I am pretty sure Walmart will follow in the US. Can I ask, is it the retailers who look to link with SW or do you go out looking for retailers?

Boo! But to be honest, I had seen this coming. Like Lorna said, I would also like to see some distribution to the UK supermarkets. One problem though, I see Kobo still haven't resumed distribution of indie titles to the UK after the tabloid OUTRAGE incident (and hence no longer distribute indie titles to WHSmith). They're all available in the US Kobo store and elsewhere, but if you access the site from a UK server... :(

I recently did some research into Google Play and there seem to be two issues: First, authors sell very few books on that platform. Second, part of the agreement with Google Play when signing up is that they can change the price of your book without notice (which would obviously lead to a lower price). And Amazon price matches, so....That's what kept me from signing up.

Mark, I just moved on to Google last month - have done no marketing and they are already selling better than Apple for me, better then Kobo, and coming up behind B&N. No where near Amazon of course, but no one really is. I need more time to tell better.

Yeah, the discounting is a pain, and took a bit to figure out the system so that my prices ended up where I wanted them. That is why I would like Smash to work a deal :) If they change their system I will have to refigure the price, but I got a nice check from them last month - so people do sell there. Many sell a lot more than me.

Do you suppose this has anything to do with Adobe Digital Editions announcement earlier last week that they'd be phasing out all tech support on their older editions and all e-reader distributors would have to upgrade their devices and their servers to the newer (i.e., more costly) platform?

"Amazon is to drop a clause banning third party Marketplace traders across the EU from offering products elsewhere more cheaply as of tomorrow (30th August).

"The move follows trading standards investigations in the UK and Germany triggered by numerous complaints from traders that the rule was unfair. The Office of Fair Trading said it began investigations last October, fearing the rule was anti-competitive.

"Amazon had demanded that third party traders who use its Marketplace platform did not offer their goods anywhere else more cheaply. After a parallel investigation into the same issue by the Federal Cartel Office in Germany, Amazon has decided to alter the policy.

"From tomorrow (30th August) the price parity clause will be dropped across the EU. As a result, the inquiries in the UK into whether the policy was anti-competitive are expected to be closed."

On other points, Google Play may not be a big player in the US, but with 44 stores around the globe including key tracts of SE Asia where Amazon mostly blocks downloads, and a significant expansion plan for 2014 this is a very useful store to be in.

Similarly the Sony announcement clearly states it is the North America ebook store that is closing. there is nothing from Sony to suggest they are closing the Sony reader Stores in the UK, japan, Austria, Germany and Australia. Obviously Smashwords did not distribute to these stores, but might that be an option for the future?

Lorna mentions the UK supermarket ebook stores Sainsbury and Tesco (Tesco Blinkbox go live this spring). It looks like they will be off limits to indies this year, but neither have rules out the possibility for the future. The two supermarkets are going to be BIG players on the UK scene and would be well worth pursuing.

Smashwords distribution to the UK is, Apple UK aside, pretty abysmal right now, with WH Smith off-limits and Kobo UK dead in the water. However we understand you have two pending distribution deals that will help things along, one with the supplier to Waterstone's and one with the supplier to Foyles.

The other key European market right now is Germany, where again Smashwords is missing a lot of the action. The seven stores of the Tolino Alliance, for instance, have decimated Amazon's market share through 2013. Germans can choose from almost twenty ebook stores, only two or three of which are in the Smashwords feed. Add one more when the new distribution partner comes on board and there's still much that could be done to help indies reach the 45 million English speakers (more than Australia and Canada combined) in Germany.

The Smashwords partnership with Flipkart in India was one of the best moves from Smashwords i along while, but Flipkart is part of the old guard online ebook stores, much like Infibeam, Amazon India and the Kobo India partner stores.

What chance we might see Smashwords get distribution to the new generation of ebook retailers like Newshunt and Rockstand in India, Ookbee in Thailand and similar innovative retailers in indonesia, etc, who understand the need for glocalization and local payment options. Amazon thinks that because Americans are still using 20th century payment methods so should the rest of the world - check out the hoops Kindle India have to jump through to buy an ebook!

The global ebook market is just beginning to take off. Sadly Amazon's expansion programme has run out of steam, and Apple seems to be at a standstill. The 51 iBooks stores sound impressive but it's been along while since they opened a new store. Key markets like South Africa ad India are off limits for Apple iBooks buyers.

Your new partners will help get indies into Kalhari and Exclus1ves in South Africa as well as one of the pending partner's own ZA stores, but there are still major opportunities out there.

The global ebook market is going to dwarf the US many times over in the next few years. We're hoping Smashwords will play a key role in helping indies reach the literally billions of readers that will soon be going digital.

Kathy Steinemann was right when she said that "Authors are a big part of the problem. Many of them will link to their Amazon books and/or author pages to the exclusion of all other sites." Amazon is considered the big player because we all *think* it's the big player and so most authors support it over the other sites. I know many promo sites have a 10 reviews at amazon requirement and ignoe the other sites, leaving authors having to push the amazon version to get reviews in order to get to list on the sites... it's a huge circle and doesn't necessarily make amazon an authors best channel. I sell more through smashwords than I do amazon.

This news about Sony concerns me because, since Kobo removed a lot of Smashwords titles over concerns about content, very few of mine have been reinstated and now those titles -that were available to Sony customers- won't be when they transfer to Kobo. Is anything more being done about the situation with Kobo? I note that you talk about them trying to woo authors from distributing through Smashwords to going direct through them. Is this the real reason behind them not reinstating Smashwords' titles on Kobo?

Hi Catherine, thanks for the question. Kobo has been working diligently with us behind the scenes on two fronts. 1. They're working to get as many Sony titles up at Kobo as possible so Sony customers don't lose cloud access to their prior purchases. 2. They're working to get as many titles as possible reinstated after the WHSmith purge from a few months ago, in which many books got removed even though they weren't in the prohibited categories of incest, pseudo-incest, bestiality and underage erotica. If you contact our support team (click the support link at the bottom of any Smashwords page) and identify your titles missing from Kobo, we try to get them reinstated asap. These lingering issues have nothing to do with their operation of their own platform. It's just a massive but not insurmountable challenge of identifing gaps between the Sony and Kobo catalogs, and identify titles that were erroneously purged. Even if you take no action, there's a decent chance the actions we and Kobo are taking over the next couple months will automatically correct the problem of missing titles. But rather than wait, definitely let our support team know.

Although the Sony news is unfortunate, change is ever present. As readers and writers we can be the change agents. Read and review with integrity your favorite books. Write and edit with integrity your chosen genre, whether it be erotica or nursery rhymes for children. It's the purity of the reading and writing experience that will remain. We can all be part of that. I might add that Mark Coker and Smashwords are excellent examples of nurturing the reading and writing experience like none other. Mark Coker and Smashwords have been leaders of independent publishing and opening up new access to readers.

I was just at sonyreader and see so many comments by readers themselves. Smashwords need to go to the comments page and add this article so that the readers know to transfer their books to Kobo. As an author I get more sales from Sony then any other Smashwords distributor.